Here’s Why Solar Stocks are Getting Crushed Now

Despite news that LDK Solar (NYSE:LDK) had a very profitable first quarter, with a net income of $135.4 million, up from just $7.2 million last year, LDK shares are down this week after they warned of a less profitable second quarter for the solar energy sector. Analysts had estimated that LDK would bring in $772 million in revenue during its second quarter, but LDK warns that figure is more likely to be $710-760 million.

Another solar energy giant, SunPower (NASDAQ:SPWRA), has also been in the news lately for raising their revenue expectations, though still lowering EPS estimates from $1.80 to $1.20-1.70. The U.S.-based SunPower stands to benefit from government cuts to solar energy subsidies in Europe that are hurting the industry at large. In the past, Europe has dominated the solar energy market in large part due to government subsidies in countries like Germany and Italy, the world’s second larger solar market. However, economic pressures have led them to cut subsidies just when companies have been ramping up production, leading to price cuts and the expectation of an oversupply.